Sears, Roebuck and Co. v. Brown

Citation806 F.2d 399
Decision Date03 December 1986
Docket NumberD,No. 919,919
PartiesSEARS, ROEBUCK AND CO., Allstate Insurance Company, Allstate Life Insurance Company, Allstate Enterprises, Inc., Coldwell, Banker & Company, and Dean Witter Reynolds Inc., Plaintiffs-Appellants, v. Howard B. BROWN, Acting Commissioner of the Department of Banking of the State of Connecticut, and The State of Connecticut, Defendants-Appellees, and The Connecticut Bankers Association and The Savings Banks' Association of Connecticut, Defendants-Intervenors. ocket 85-9041.
CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Duane C. Quaini, Chicago, Ill. (Robert C. Johnson, Alan M. Posner, Sonnenschein, Carlin, Nath & Rosenthal, Chicago, Illinois, Thomas D. Clifford, Skelley, Clifford, Vinkels, Williams & Rottner, P.C., Hartford, Conn., of counsel), for plaintiffs-appellants.

John G. Haines, Asst. Atty. Gen., Hartford, Conn. (Joseph I. Lieberman, Atty. Gen. of the State of Connecticut, Jane D. Comerford, Asst. Atty. Gen., Hartford, Conn., of counsel), for defendants-appellees.

Allan B. Taylor, Hartford, Conn. (J. Bruce Boisture, Day, Berry & Howard, Hartford, Conn., of counsel), for defendants-intervenors.

(C. Lawrence Evans, Jr., General Counsel and Executive Vice President, Robert-John H. Sands, Corporate Counsel, Washington, D.C., for amicus curiae Acacia Mut. Life Ins. Co.)

Before KEARSE, CARDAMONE and PIERCE, Circuit Judges.

PIERCE, Circuit Judge:

Appeal by Sears, Roebuck & Co. ("Sears") and five of its financial service subsidiary companies, Allstate Insurance Company ("Allstate"), Allstate Life Insurance Company ("Allstate Life"), Allstate Enterprises, Inc. ("AEI"), Coldwell, Banker & Company ("Coldwell Banker"), and Dean Witter Reynolds Inc. ("Dean Witter"), from a judgment of the United States District Court for the District of Connecticut, Jose A. Cabranes, Judge, 641 F.Supp. 878, upholding the constitutionality of a Connecticut banking statute, Conn.Gen.Stat.Ann. Sec. 36-5a(a)-(d) (West Supp.1986), (the "Act"), which regulates the manner and extent to which bank or savings and loan holding companies may establish offices in the State of Connecticut. 1 Appellants have

challenged the constitutionality of the Act as applied to them on Commerce Clause and Supremacy Clause grounds. For the reasons below, we affirm the judgment of the district court.

BACKGROUND

Three subsections of the Act, section 36-5a(b), (c) and (d), are in issue here. Generally, these provisions establish a regulatory scheme that affects all banks and savings and loan associations ("S & L's"), corporations that own one or more banks or S & L's, and the non-banking subsidiaries of such corporations. The Act requires these organizations to obtain permission from the Commissioner of the Connecticut Department of Banking ("Commissioner") prior to opening any office in Connecticut. Subsection (b) establishes a general prohibition precluding these organizations from engaging in "banking business", which is defined under the subsection as including the following activities: "receiving deposits, paying checks, lending money and any activity which is determined by the Commissioner to be so closely related to banking as to be a proper incident thereto", without the permission of the Commissioner. 2

Subsection (c) provides six exceptions to the general prohibition of subsection (b), three of which are relevant here. The first exception allows the subsidiaries of banks, stock S & L's, mutual savings banks or mutual S & L's organized under the laws of Connecticut or having their principal place of business located in the State of Connecticut to open offices without the permission of the Commissioner. Conn.Gen.Stat.Ann. Sec. 36-5a(c)(3) (West Supp.1986). This exception to the applicability of the general prohibition against "banking business" is available as long as the subsidiary's activity is limited to one or more of the functions which its parent organization may carry on directly through the exercise of its express or implied powers under state law.

The second such exception is a grandfather provision relieving all "holding companies" and their subsidiaries from the statute's application for all offices that were authorized and in fact engaged in banking The final relevant exception to the application of the general prohibition against "banking business" is stated in subsection (d) and is incorporated by reference into subsection (c). Id. Sec. 36-5a(c)(6). Under this exception firms that are otherwise precluded from opening offices engaged in banking business in Connecticut are allowed to open two such offices per year in Connecticut provided that those offices do not engage in "deposit services". Deposit services are defined by subsection (d) to include "deposits, withdrawals, advances, payments and transfers of funds to or from a deposit account." Under subsection (d), the Commissioner is authorized to charge a fee covering the cost of processing applications by these restricted organizations to engage in "banking business" and has established such fee to be $1,000.

business prior to June 1, 1984. Id. Sec. 36-5a(c)(4). 3

The facts of this controversy are undisputed as the case was presented to the district judge upon cross-motions for summary judgment with a joint statement of facts. Sears is a New York corporation with its headquarters in Chicago. Appellant AEI is a wholly owned subsidiary of Sears and itself wholly owns the Sears Savings Bank (formerly known as the Allstate Savings and Loan Association), a California chartered stock thrift institution organized and existing under the laws of California and having all of its offices in California. Therefore, Sears qualifies as a "holding company" under the Act because of its controlling interest in the Sears Savings Bank as a wholly owned second-tier subsidiary. 4

On August 2, 1984, the Commissioner notified Sears of the Act's requirements and requested that Sears provide sufficient information for his determination as to whether two Sears Financial Network centers ("SFN centers") fell within subsections (b) or (d) of the statute. SFN centers generally combine the activities of agents of Allstate and representatives of Dean Witter and Coldwell Banker in order to offer their respective products and services in a central location, typically within a Sears retail outlet. The products offered at SFN centers include the various lines of property, liability, life and health insurance and other products marketed by Allstate and Allstate Life; the dissemination and acceptance of loan applications for AEI; residential real estate brokerage services available through Coldwell Banker; and securities brokerage, principal trading, domestic and foreign investment banking, and related services through Dean Witter. Sears contemplated the establishment of two SFN centers, one in West Hartford and another in Waterford, Connecticut, apparently without knowledge of the application requirement or the prohibitions contained in the Act.

After filing this suit for declaratory judgment in the United States District Court for the District of Connecticut to challenge the constitutionality of the Act, but prior to judgment, Sears applied under subsection (b) to the Commissioner on October 11, 1984 to authorize the two SFN centers and a Sears retail store as offices of a "holding company" which are not to be engaged in banking business. Approval as to the retail store was granted by the Commissioner Within the broad array of financial services provided at a Financial Network are numerous activities which fall within the definition of banking business in section 36-5a(b) of the General Statutes. Such activities include, but are not limited to, the processing of loan applications for Allstate Enterprises, Inc., which loans money for the purchase of automobiles, boats and recreational vehicles and makes second mortgage loans to Connecticut residents, and the making of first mortgage loans on property located in Connecticut through Coldwell Banker Residential Group.

on November 14, 1984, but, on December 28, 1984, the Commissioner determined that the SFN centers would be involved in banking business and that certain activities of the SFN centers would constitute deposit services. More specifically, the Commissioner found that:

JA-41.

The Commissioner also found that two of Dean Witter's services constituted "deposit services" that are prohibited by subsection (d) of the Act: (1) the brokering of certificates of deposit for various financial institutions, and (2) the "Sweep Account" feature of the Active Assets Account ("AAA") program offered by Dean Witter. The brokering services that the Commissioner characterized as deposit services involved Dean Witter's brokering of certificates of deposit offered by various financial institutions, including Sears Savings Bank, and the brokering of Sears Money Market Savings Accounts offered by Sears Savings Bank. The AAA program offered by Dean Witter provided a group of integrated financial services that included a margin account capability that would allow an owner of an AAA account to buy and sell securities on a cash basis or on credit. More importantly for purposes of the statute, an owner of an AAA account might also elect to have the funds in his account that were not used for a specific investment purpose automatically invested in one of Sears Savings Bank's "Super NOW" accounts. Dean Witter also acts as agent for an owner who wishes to use the funds deposited in this "Sweep Account." The Commissioner conditioned approval of the SFN centers upon the discontinuation of both these activities. Hence, the Commissioner indicated that he would grant approval pursuant to subsection (d) for the application apropos the two SFN centers conditioned upon two requirements, (1) that Sears not engage in deposit services at the SFN centers and (2) that Sears submit a $1,000 fee for...

To continue reading

Request your trial
5 cases
  • Environmental Encapsulating Corp. v. City of New York
    • United States
    • U.S. District Court — Southern District of New York
    • July 31, 1987
    ... ... 1982), cert. denied, 459 U.S. 1170, 103 S.Ct. 815, 74 L.Ed.2d 1014 (1983); Sears, Roebuck & Co. v. Brown, 641 F.Supp. 878, 892 n. 22 (D.Conn.1985), aff'd, 806 F.2d 399 (2d ... ...
  • Great Atlantic & Pacific Tea Co v. East Hampton
    • United States
    • U.S. District Court — Eastern District of New York
    • March 18, 1998
    ... ... See Brown v. State, 89 N.Y.2d 172, 652 N.Y.S.2d 223, 224 & n. 8, 674 N.E.2d 1129 (1996); Under 21 v. City ... Sears, Roebuck & Co. v. Brown, 806 F.2d 399, 405 (2d Cir.1986). A statute that directly regulates or ... ...
  • Valley Bank of Nevada v. Plus System, Inc., 89-16287
    • United States
    • U.S. Court of Appeals — Ninth Circuit
    • September 11, 1990
    ... ... a "two-tiered approach to analyzing state economic regulation under the Commerce Clause." Brown-Forman Distillers Corp. v. New York State Liquor Auth., 476 U.S. 573, 578-79, 106 S.Ct. 2080, ... BT Inv. Managers, Inc., 447 U.S. 27, 38, 100 S.Ct. 2009, 2016, 64 L.Ed.2d 702 (1980); Sears, Roebuck & Co. v. Brown, 806 F.2d 399, 409 (2d Cir.1986). The D.C. Circuit has held that in at ... ...
  • NC Ass'n of Electronic Tax Filers, Inc. v. Graham
    • United States
    • North Carolina Supreme Court
    • May 7, 1993
    ... ...          Brown-Forman Distillers v. N.Y. Liquor Auth., 476 U.S. 573, 578-79, 106 S.Ct. 2080, 2084, 90 L.Ed.2d ... Sears, Roebuck and Co. v. Brown, 806 F.2d 399 (2d Cir. 1986) (applying balancing test and holding ... ...
  • Request a trial to view additional results
1 books & journal articles
  • Preemption and Commerce Clause Issues
    • United States
    • ABA Antitrust Library Business Torts and Unfair Competition Handbook Business tort litigation
    • January 1, 2014
    ...(9th Cir. 2011) (admiralty laws); International Dairy Foods Ass’n , 622 F.3d at 649 (consumer protection); Sears, Roebuck & Co. v. Brown, 806 F.2d 399, 409 (2d Cir. 1986) (banking); Tousley v. N. Am. Van Lines, 752 F.2d 96, 103 (4th Cir. 1985) (protection of in-state investors); Southern Un......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT